Contingency Planning and Risk

Contingency planning and risk go hand-in-hand. Indeed contingency planning is a last resort and should be considered for high risks only when it’s not possible to prevent or avoid an event, reduce the impact or even transfer the risk to someone else.

Contingency planning and risk management are often used in project management and business continuity planning.

Contingency planning prepares the organisation to respond when a high risk occurs. This includes unplanned events or when someone fails to deliver.

A contingency plan is your plan B.

Contingency Planning and Risk

When addressing risk you should consider both countermeasures and contingencies.

Taking active steps to reduce the possible effects of risk is not indicative of pessimism, but is a positive indication of good project management. – Robert Buttrick

Countermeasures include

Prevention – what can you do to stop―avoid―the threat or problem?

Reduction – what can you do to reduce the level of risk?

Transference – what can you do to transfer the risk to a third-party?

In contrast, contingencies are planned activities that come into play when the risk occurs

What will you do if things start to go wrong?

How will you know if a risk materialises?

How will you check and manage the risk?

And finally, there’s acceptance

Are you willing to accept the consequences? Acceptance should be done out of choice not ignorance.

Contingency Planning and Risk Identification

Effective risk analysis starts with the identification of risks and an assessment of the potential to disrupt or harm your project or business operations. The contingency chart is a simplification of the decision tree and is useful for addressing risk.

The Contingency Chart

If you intend to use the contingency chart to map risks and mitigating actions do so with the project team or business during a risk workshop (see How to Manage Project Risk.)

The contingency chart helps to map the risks associated with a project or service area by listing the things that could go wrong, including the more likely possibilities, if a risk materialises.

If you are familiar with decision theory you will recognise that I am describing the decision tree.

However, in the case of the contingency chart the degree of sophistication normally associated with a proper decision tree is not necessary. There’s no need to assign probabilities or costs. Its purpose is simply to help you think through the alternatives and arrive at options for dealing with project or business risk.

Beginning with the most significant risk place a Post-it note at the top of a flip-chart. Next consider what happens if the risk materialises and jot these down on a new level. Sequentially brainstorm until enough ideas are generated.

Finally, for each eventuality consider both countermeasures and contingencies.

Countermeasures

What can you do to tackle the risk?

What can you do to reduce the level of risk?

Contingencies

What will you do if things start to go wrong?

How will you know if a risk materialises?

How will you monitor and manage the risk?

For those managing projects consider bringing the most risky aspects of the project forward in the schedule or changing the project scope to reduce inherently high risk strategies.

You don’t concentrate on risks. You concentrate on results. No risk is too great to prevent the necessary job from getting done. – Chuck Yeager

The value in this approach to contingency planning and risk management is having thought through the eventualities and come up with countermeasures and contingency plans so you may realise your goals. Forewarned is forearmed!